Tools to Reduce Countable Income
Nuts & Bolts
When comparing income to the Substantial Gainful Activity level, the Social Security Administration will look at an SSDI beneficiary’s countable income. Countable income does not include Paid Time Off, Impairment-Related Work Expenses, Subsidies, or Special Conditions. Even when gross earnings are above the Substantial Gaiinful Activity level, countable income may be below this level.
Reviewing the Basics of Substantial Gainful Activity (SGA)
Tool 3 describes how the Substantial Gainful Activity (SGA) level is used after the Trial Work Period (TWP) has ended to determine if an SSDI beneficiary should receive their SSDI check. The details require explanation, so see Tool 3 to learn more.
The SGA level is set each year by the Social Security Administration (SSA). One amount is for people who are not blind, and a higher amount is for people who are blind. You can find a chart of SGA levels since 1975 on the SSA website.
Paid Time Off (PTO)
When comparing a person’s income to the SGA level, the SSA counts only earnings paid due to work activity. If a beneficiary is paid for time when they did not work, that pay is not considered countable income for that month. Examples of Paid Time Off (PTO) include vacation time, personal time, paid holidays, sick leave, and bereavement time (upon the death of a family member). PTO can also include pay for time during unplanned closures, such as for a snow day or hurricane.
The SSA policy for PTO appears in Social Security POMS DI 10505.010 C. Always reference this POMS when communicating with SSA about PTO.
Note: SSA policy states that “only the earnings paid as a result of work activity should be used in determining if the individual has engaged in SGA in a particular month.”
Example of PTO Reducing Earnings: Nadia
Nadia, an SSDI beneficiary, completed her TWP in December 2017. Her 36-month Extended Period of Eligibility (EPE) began in January 2018.
Nadia’s countable earnings were well above the SGA level throughout 2018. Because January 2018 was her first month of SGA-level earnings during the EPE, her SSDI was paid for that month (the Cessation Month) and the next 2 months (giving her a 3-month Grace Period).
In January 2019 (her thirteenth EPE month), Nadia’s gross earnings were $1,430. She had 4 PTO days during the month: 1 holiday, 2 sick days, and 1 snow day (her employer’s policy allowed her to be paid for the snow day). Nadia’s 4 PTO days are valued at $260 (4 x $65) and reduce her countable earnings for the month to $1,170 ($1,430 - $260).
Since Nadia’s countable earnings for January 2019 are less than the $1,220 SGA amount for 2019, she is eligible for an SSDI payment for January.
About Impairment-Related Work Expenses (IRWEs)
Impairment-Related Work Expenses (IRWEs) are costs for disability-related items or services that an SSDI beneficiary needs to work. When computing countable income, SSA will deduct the cost of an IRWE from gross wages. The countable income is then compared to the SGA amount.
By lowering a month’s countable income, the beneficiary is more likely to qualify for an SSDI payment in that month.
To qualify as an IRWE, the expense must meet the following criteria:
- The SSDI beneficiary must pay for the item or service. If the beneficiary pays for only a portion of the cost, the IRWE is limited to that amount. If another source pays the full cost (e.g., Medicaid or a private insurance plan) or will reimburse that cost, the expense is not an IRWE.
- The item or service must be related to an impairment of record with Social Security.
- The item or service must be necessary for work. If the person would need the item if they did not work (e.g., an anti-seizure medication) or uses it for some non-work activity (e.g., a speech generating device that is also used at home), the expense still qualifies as an IRWE if all criteria are met.
- The cost for the item or service must be “reasonable” (i.e., it represents the standard charge for the item or service in the beneficiary’s community).
An IRWE deduction is not time-limited. Some IRWEs recur monthly and may go on for years. An example is regular copayment for insulin to treat diabetes. So long as the criteria are met, the IRWE deduction can go on indefinitely.
Note: To be approved as an IRWE, the item or service must directly relate to a disability that is the basis for the SSDI benefit or to any other medical condition for which Social Security has medical records.
Types of Expenses That Can Qualify as IRWEs
SSA provides examples of items and services that can qualify as IRWEs if all the criteria are met:
- Services of a medical provider, such as a medical doctor, psychiatrist, psychologist, mental health counselor, physical or occupational therapist, speech therapist, or chiropractor
- Prescription drugs (the copayment amount if insurance covers part of the cost)
- Attendant care (i.e., home health aide) services including, in some cases, payments to family members to provide the service
- Medical equipment or devices
- Specialized transportation services or modifications to a vehicle
- Service animals (costs related to purchase, training, feeding, veterinarian, and special harnesses/other equipment)
These are common IRWE examples, but there is no exclusive list of what qualifies as an IRWE.
Types of Expenses That Do Not Qualify as IRWEs
Examples of expenses that do not qualify as IRWEs include:
- Routine annual medical exams
- Routine optician services (unrelated to a visual disability)
- Routine dental exams
- Health insurance premiums
Strategies for Documenting IRWEs
The beneficiary and those working with them (e.g., a benefits planner) need to have a system for collecting records of IRWE expenses. Here are some suggestions:
- Document the need: It may be clear that the item or service is needed so the beneficiary can work, such as medication to prevent seizures or to control blood pressure. If in doubt, get a written statement from a doctor or other health care provider. For example, you could get a statement from a psychiatrist to justify a copay for counseling. In some cases, SSA may accept a doctor’s statement, for example, to establish an IRWE for the next 6–12 months with a need to produce a new statement periodically.
- Keep receipts: A receipt is the best proof of what the beneficiary paid. The receipt should name the item or service paid for, so be sure to ask the vendor to add this if it does not appear automatically. Online receipts and payment records may be used.
- Keep bills for services and statements from insurance providers: Some health care vendors bill the health insurance provider first and then bill the beneficiary for their share of the cost. The health insurance provider may issue a statement to the beneficiary of what the health insurance paid and what the beneficiary owes as their share, such as a 20% copay with Medicare Part B. Even if SSA does not initially require this documentation, having these records will be helpful if SSA later questions the expense.
- Maintain a log of potential IRWEs: SSA always prefers one of the documentation methods suggested above. If receipts do not exist or do not clarify what a service was, the beneficiary can keep a written monthly log of potential IRWEs. For example, if the beneficiary pays by cash, without a receipt, for special transportation, through a public transportation company or a private vendor, the beneficiary’s own record of the itemized cost may be acceptable.
Strategies for Providing IRWE Documentation to SSA
Here are some recommendations for reporting IRWEs to SSA:
- Create a cover letter that references the SSA policies on IRWEs and that provides a monthly list of IRWE use, with each item’s date and dollar value.
- With the cover letter, include any receipts or other documentation (as listed just above) to support the IRWE use.
- Complete an online Form SSA-821, Work Activity Report – Employee, and upload documentation supporting your IRWEs. This is particularly helpful with recurring monthly IRWEs.
- Try to anticipate SSA’s questions and make sure the documentation answers them.
SSA might request that the IRWE information be submitted using one or more official SSA forms (e.g., Form SSA-795, Statement of Claimant or Other Person, or Form SSA-820-BK or Form SSA-821-BK, used when SSA does a formal review of earnings to make an SGA decision).
Tip: A benefits planner should be able to assist the beneficiary with developing the best strategy for reporting IRWEs to the local SSA office.
A Subsidy exists when the employer does either of the following:
- Willingly pays an employee more in wages that the value of the work performed
- Receives full value from an employee’s services because the employer provides extra support to the employee. (This is different from a Special Condition, where a third party provides support.)
About Special Conditions
Unlike a Subsidy, a Special Condition is when a third party (like a job coach) provides support to the employee.
Note: SSI payment calculations also use IRWEs. However other SSDI options for reducing countable income do not work with SSI. For example, PTO, Subsidy, and Special Condition can lower SSDI countable earnings, but they are not used for SSI. Yes, the acronyms of these two programs—SSI and SSDI—are similar, but otherwise they have many differences!
How Subsidy and Special Condition Play into Countable Income
When making an SGA determination, SSA is concerned only with the amount of an individual’s earnings that represents the real value of their work. The value of the Subsidy or Special Condition is subtracted from gross wages to compute the countable income. The countable income is then compared to the SGA amount.
Example of Subsidy and Countable Income
With a Subsidy, the employer is paying the individual more than the value of their work. For example, if a beneficiary with a disability produces only 70% of what the employer would expect from an employee without a disability, the employer has provided a 30% Subsidy. In this example, if the monthly gross earnings paid were $1,500, $450 of that amount is considered a Subsidy (.30 x $1,500). This results in $1,050 countable earnings for the month ($1,500 – $450).
Example of Special Condition and Countable Income
With a Special Condition, the individual produces full value for the wage paid because a third party provides extra services. These services allow the employee to work with their full value. Typical extra services are job coaching and mentoring. SSA will assign a monthly value to the Special Condition and deduct that amount from gross earnings to determine countable earnings. For example, if the SSDI beneficiary is paid $1,600 gross for the month and SSA values the extra services at $250 for the month, countable earnings are reduced to $1,350 for the month ($1,600 – $250).
Upshot of Both Examples
In these examples, countable earnings have been reduced below the 2023 SGA level for a person who is not blind ($1,470 per month) meaning that SSA would find that SGA was not performed that month. The beneficiary would get their SSDI payment for that month during the EPE or after the EPE before Termination.
Note: The value of a Subsidy or Special Condition can be used to reduce countable earnings for a month. SSA compares the countable income to the SGA amount.
Calculating a Subsidy
SSA recognizes two types of subsidies: specific and non-specific.
- Specific Subsidy: A Subsidy is specific if the employer computes a specific amount. SSA’s policy (in POMS DI 10505.010 A.2) states that the employer “will designate a specific [Subsidy] amount after figuring the reasonable value of the employee’s services” and that “an adequate [employer’s] explanation as to how a specific subsidy was calculated will normally suffice without…additional development [by SSA]…”.
- Non-Specific Subsidy: A Subsidy is non-specific if the employer identifies a certain percentage or amount as a Subsidy with no details of how it was calculated. Or the employer may detail specific circumstances to justify a Subsidy but not assign a value to it. With either case, SSA instructs its staff to send the employer Form SSA-3033 (Work Activity Questionnaire). SSA must set the amount of the Subsidy by estimating the proportionate value of the beneficiary’s services according to the prevailing pay scale for such work.
Calculating a Special Condition
Job coaching is a common Special Condition. The job coach typically works for a private agency. The job coach may provide a range of services, such as modeling job duties, observing work and addressing challenges, and identifying strategies to stay on task and eliminate distractions. A job coach can also reinforce appropriate on-the-job behaviors, like communication with supervisors, co-workers, and customers.
The monthly value of a job coaching Special Condition is not related to the job coach’s income. Instead, it is calculated by multiplying the beneficiary’s hourly wage by the number of job coach hours during the month that directly supported the SSDI beneficiary’s work.
Note: During the EPE, if the value of a Subsidy or Special Condition reduces a beneficiary’s monthly countable earnings to a level at or below the SGA rate for the year, they will be eligible for an SSDI payment for that month.
Documenting and Submitting Proof of Subsidy or Special Condition
The beneficiary and anyone working with them (e.g., a parent, benefits planner, or vocational counselor) need a system for collecting information to document a Subsidy and/or Special Condition.
Use the SSA Form for a Subsidy or Special Condition
Use one of these forms:
- Form SSA-821-BK, Work Activity Report – Employee (or Form SSA-820-BK – Self Employment): Used when SSA conducts a Work Activity Review, this form is completed by the SSDI beneficiary, often with help from a benefits planner or a vocational counselor. SSA uses this completed form and supporting documents to decide if the beneficiary had earnings over the SGA level during the period under review. Questions 5 and 6.A. relate to establishing a Subsidy or Special Condition. This form may be completed online, or it may be or printed and submitted via fax or mail.
- Form SSA-3033, Work Activity Questionnaire: When SSA learns through a completed Form SSA-821-BK or other information that a Subsidy or Special Condition may exist, this form asks the employer for detailed information.
A good strategy is to submit completed forms and supporting documents for a Subsidy or Special Condition to SSA before you are asked for them. This is recommended because SSA may not start a timely Work Activity Review. A benefits planner or vocational counselor can help with this process:
- Start with Form SSA-821-BK. If SSA has documented a ninth Trial Work Period month or if the benefits planner believes the TWP has ended and the beneficiary has gross earnings above the SGA level, submit this form as soon as possible. As noted above, use questions 5 and 6.A. to document the existence of any Subsidy or Special Condition.
- Get the employer to fully complete Form SSA-3033. If the employer is willing to check one of the boxes in question 5 (stating that the beneficiary works at a certain percentage of “other employees’ productivity”), that could help lock in a Subsidy value.
- Obtain supporting letters from the employer, a job coach, or on-site supervisor. Form 3033 has very little room for narrative comments. Often, Form 3033 is completed by someone with little or no on-site experience, making the job coach and supervisor letters important, if available.
- The benefits planner or vocational counselor should create a cover letter. This can highlight key information in documents being submitted to support a Subsidy or Special Condition.
- All the above documents should be faxed or mailed to SSA.